Public liability and professional indemnity insurance face soaring costs, APRA data shows
Public liability and professional indemnity insurance face soaring costs, APRA data shows | Insurance Business Australia
Insurance News
Public liability and professional indemnity insurance face soaring costs, APRA data shows
Businesses respond to rise by opting for higher deductibles
Insurance News
By
Jonalyn Cueto
The Australian Prudential Regulation Authority (APRA) has unveiled its National Claims and Policies Database (NCPD) statistics for the year ending Dec. 31, 2023, offering a comprehensive view into the evolving landscape of professional indemnity (PI) and public and product liability (PL) insurance.
The latest NCPD report reveals a notable surge in premiums and claims costs across key insurance categories. Public liability insurance premiums have increased by 40% since 2015, outstripping general inflation. This rise began in 2017 and is largely attributed to worsening claims experience. Businesses have responded by opting for policies with higher deductibles, shifting more risk onto themselves to manage rising costs.
Notable surge in claims and insurance costs
Bodily injury claims have been a primary driver of increased premiums, with average finalised claim sizes growing by 5.5% annually since 2013. Recent years have seen higher incurred costs for accidents, particularly those related to work injuries and falls. Work injury claims, which have doubled in size compared to other bodily injury claims, are highlighted as a major contributor to cost pressures. The data also shows a rise in psychological claims, exacerbating overall inflation in claims costs due to social, legal, and medical factors.
Professional indemnity insurance has similarly experienced a premium hike, rising 27% since 2015, with large and corporate businesses facing the steepest increases. Although finalised claims costs have remained stable, newer data suggests that incurred costs are trending higher.
Directors and officers (D&O) insurance has come under scrutiny for escalating premiums and large claims, particularly in relation to side C1 coverage amid a rise in shareholder class actions. The report notes that the number of large D&O claims, defined as exceeding $1 million, nearly tripled from 2009-2015 to 2019-2021, driven by a surge in claims above $5 million.
Since 2015, public liability premiums have surged by 53%, with the most significant impacts on large and corporate businesses. Meanwhile, industries such as construction, retail trade, and mining are particularly affected by these trends. As insurers and businesses navigate these challenges, ongoing data and analysis from the NCPD will be crucial in shaping future strategies and solutions.
Do you have something to say about these findings? Let us know in the comments below.
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